Assume that a bank receives a primary deposit of $1,000, and the reserve requirement is 15%. Which of the following would reflect the asset side of the balance sheet after a maximum loan amount has just been made?

Question

Quizplus · Accepted Answer

The reserve requirement is 15%, so the bank must hold back $150 (15% of $1,000) as reserves. This means the bank can lend out a maximum of $850. Therefore, the asset side of the balance sheet would show reserves of $150 and loans of $850, for a total of $1,000. So, the best choice is D, which states reserves of $1,000 and loans of $850.

Assume That a Bank Receives a Primary Deposit of $1,000